After keeping on hold the forced resignation of the managing director (MD) of the Vadodara Stock Exchange (VSE) for over a week, the Board of Governors on Thursday reinstated G Someswara Rao, following directions from the market regulator the Securities and Exchange Board of India (SEBI), which criticised the Board for not taking prior approval before forcing him to resign on October 7.

In a letter sent to the Board of Governors on Wednesday, the SEBI maintained that “Rao will continue as MD and will discharge all his duties in this capacity till further directions from SEBI.” Following this, he was asked to rejoin as the MD while M G Sheikh, who was appointed by the Board as MD following Rao’s forced resignation, was given another charge. The SEBI had earlier directed the Board on October 8 to keep Rao’s resignation “in abeyance” until further directions.

Rao, who was appointed as the MD of the VSE on June 25, 2013, following SEBI’s approval, was asked to resign or face termination by the members of the Board of Governors. While Rao followed this up by tendering his resignation to the Board on October 7, he also informed the SEBI about the decision upon which the market regulator started investigating the matter.

While Rao continued as the MD, he said he was forced to give up his official mobile number and his computer connection was snapped. He shared the office with M G Sheikh, who was asked by the Board to take up the charge as the MD after Rao resigned. Meanwhile, the SEBI removed the Board’s chairman Mukund Shah. Two other public interest directors were forced to resign.

In the letter, the SEBI stated that the “termination/removal of MD on account of his resignation is subject to prior approval of the SEBI.” The Board had not taken any such prior approval, which was in contravention of the SEBI’s regulation, it noted. “The Board of VSE has not allowed Rao to discharge his duties and therefore, your action is not in accordance with the SECC Regulations and as per SEBI’s direction dated October 8, 2013.”

President of VSE Brokers’ Forum, Vishnu Patel, termed the Board’s action of seeking Rao’s resignation as “unethical”. “We have never seen anything like this before here. The Board does not follow SEBI rules and work unconstitutionally,” he said.